Graham and Doddsville -- Value Investing In The New Era Message Board

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Strategies & Market Trends : Graham and Doddsville -- Value Investing In The New Era

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To: porcupine --''''> who wrote (1195)	2/5/1999 7:30:00 PM
From: Freedom Fighter	Read Replies (2) of 1722

Porc, >>It is a curious paradox that Graham was so much more open-minded and intellectually curious than many of his followers.<< I doubt Graham would have been very open minded about money flow analysis as it pertains to the value of anything. I am more open minded and intellectually curious about anyone and anything that relates to the proper valuation of a business and/or understanding the long term macro economic interrelationships that can effect interest rates, returns on capital and other value related issues. I'm not at all interested in someone who says that stocks are going to go up because he has indicators or money flows that suggest that a greater fool is going to buy them. It may be possible to make excess returns that way. I would never argue about that. It just isn't value investing. I think Graham's followers would be best off not paying attention to that stuff at all, even if it has some merit. I am sure Graham would have rejected it because he rejected all similar technical stuff. His number one student certainly rejects that stuff. Those sorts of things are timing models unrelated to business value. They would not be effective for the investor who is buying a business based on the present value of its earnings power over the next 5, 10, or more years and expects to hold it for that duration as is implied by "investing". Money flows over the next few months are not going to have any influence on the price of a stock I own now in 10 years. Its EPS, ROE, and prospects at that time will determine almost everything and ultimately the rate of return I receive from my investment. That's what value investing is. Buying as much future earnings and assets now for as little as possible. Not buying the greatest amount of money flow into a stock over the next few months. That's called "momentum investing". I know we disagree on definition sometimes, but above all Graham said that an investment operation should be businesslike. I like to think in terms of Lorenzo's Pizza on the corner of my block. If I owned and made my living at Lorenzo's would I care about money flows into Pizza stocks? No chance! Wayne members.aol.com

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